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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

/x/
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001.

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                TO               .

COMMISSION FILE NUMBER 1-13627

APEX SILVER MINES LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

CAYMAN ISLANDS, BRITISH WEST INDIES (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	NOT APPLICABLE (I.R.S. EMPLOYER IDENTIFICATION NO.)
CALEDONIAN HOUSE 69 JENNETTE STREET GEORGETOWN, GRAND CAYMAN CAYMAN ISLANDS, BRITISH WEST INDIES (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)	NOT APPLICABLE (ZIP CODE)

(345) 949-0050
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

    INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS: Yes /x/  No / /

    AT AUGUST 10, 2001, 34,667,623 ORDINARY SHARES, $0.01 PAR VALUE PER SHARE, WERE ISSUED AND OUTSTANDING.

APEX SILVER MINES LIMITED
FORM 10-Q
QUARTER ENDED JUNE 30, 2001

INDEX

		PAGE
PART I: FINANCIAL INFORMATION		3
ITEM 1.	FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	8
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND HEDGING ACTIVITIES	11
PART II: OTHER INFORMATION		12
ITEM 1.	LEGAL PROCEEDINGS	12
ITEM 2.	CHANGES IN SECURITIES AND USE OF PROCEEDS	12
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	12
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	12
ITEM 5.	OTHER INFORMATION	12
ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	12
SIGNATURES		13

2

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

APEX SILVER MINES LIMITED

An Exploration and Development Stage Company

CONSOLIDATED BALANCE SHEET

(Expressed in United States dollars)

(Unaudited)

			June 30, 2001			December 31, 2000
Assets
Current assets
	Cash and cash equivalents		$	47,656,056		$	61,103,263
	Prepaid expenses and other assets			313,219			442,023
		Total current assets		47,969,275			61,545,286
Property, plant and equipment (net)				86,236,951			77,351,505
Value added tax recoverable				5,208,641			5,024,021
Other non-current assets				203,412			132,739
		Total assets	$	139,618,279		$	144,053,551
Liabilities and Shareholders' Equity
Current liabilities
	Accounts payable and other accrued liabilities		$	1,739,760		$	2,557,529
	Current portion of notes payable			687,612			1,703,712
		Total current liabilities		2,427,372			4,261,241
Notes payable				1,823,330			1,896,396
Commitments and contingencies (Note 5)				—			—
Shareholders' equity
	Ordinary shares, $.01 par value, 75,000,000 shares authorized; 34,661,254 and 34,486,629, shares issued and outstanding for respective periods			346,612			344,866
	Contributed surplus			194,615,826			192,742,800
	Accumulated deficit			(59,594,861	)		(55,191,752	)
		Total shareholders' equity		135,367,577			137,895,914
		Total liabilities and shareholders' equity	$	139,618,279		$	144,053,551

The accompanying notes form an integral part of these consolidated financial statements.

3

APEX SILVER MINES LIMITED

An Exploration and Development Stage Company

CONSOLIDATED STATEMENT OF OPERATIONS

(Expressed in United States dollars)

(Unaudited)

			Three Months Ended June 30,						Six Months Ended June 30,						For the Period December 22, 1994 (inception) through June 30, 2001
			2001			2000			2001			2000
Income
	Interest and other income		$	502,506		$	1,421,052		$	1,247,463		$	3,155,914		$	12,471,160
		Total income		502,506			1,421,052			1,247,463			3,155,914			12,471,160
Expenses
	Exploration			842,173			1,245,841			1,933,553			2,288,179			54,541,193
	Administrative			2,172,979			2,005,371			3,641,317			3,367,968			21,106,748
	Amortization and depreciation			18,870			57,911			75,700			111,136			976,964
		Total expenses		3,034,022			3,309,123			5,650,570			5,767,283			76,624,905
		Loss before minority interest		(2,531,516	)		(1,888,071	)		(4,403,107	)		(2,611,369	)		(64,153,745	)
	Minority interest in loss of consolidated subsidiary			—			—			—			—			4,558,886
		Net loss for the period	$	(2,531,516	)	$	(1,888,071	)	$	(4,403,107	)	$	(2,611,369	)	$	(59,594,859	)
Net loss per Ordinary Share—basic and diluted(1)			$	(0.07	)	$	(0.05	)	$	(0.13	)	$	(0.08	)	$	(2.41	)
Weighted average Ordinary Shares outstanding				34,568,170			34,471,268			34,512,847			34,471,268			24,710,270

(1)

Diluted earnings per share were antidilutive for all periods presented.

The accompanying notes form an integral part of these consolidated financial statements.

4

APEX SILVER MINES LIMITED

An Exploration and Development Stage Company

CONSOLIDATED STATEMENT OF CASH FLOWS

(Expressed in United States dollars)

(Unaudited)

			Six Months Ended June 30,						For the Period December 22, 1994 (inception) through June 30, 2001
			2001			2000
Cash flows from operating activities:
	Net cash used in operating activities		$	(4,436,475	)	$	(4,485,040	)	$	(65,332,962	)
Cash flows from investing activities:
	Purchases of property, plant and equipment			(8,961,146	)		(11,779,020	)		(77,721,497	)
		Net cash used in investing activities		(8,961,146	)		(11,779,020	)		(77,721,497	)
Cash flows from financing activities:
	Payments of notes payable			(313,086	)		(236,946	)		(1,452,978	)
	Net proceeds from issuance of Ordinary Shares			—			—			191,761,070
	Proceeds from exercise of stock options			263,500			—			685,379
	Deferred organization costs			—			—			(282,956	)
		Net cash from (used in) financing activities		(49,586	)		(236,946	)		190,710,515
Net decrease in cash and cash equivalents				(13,447,207	)		(16,501,006	)		47,656,056
Cash and cash equivalents—beginning of period				61,103,263			96,296,577			—
Cash and cash equivalents—end of period			$	47,656,056		$	79,795,571		$	47,656,056
Supplemental disclosure of non-cash transactions:
	Capitalization of depreciation expense related to San Cristobal Project		$	155,512		$	80,277
	Stock issued as compensation		$	—		$	55,463
	Stock issued for mineral property option		$	309,752		$	—
	Stock issued for payment of note payable		$	775,373		$	—
	Stock issued as compensation to consultants		$	525,440		$	—

The accompanying notes form an integral part of these consolidated financial statements.

5

APEX SILVER MINES LIMITED

An Exploration and Development Stage Company

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

1. Basis of Preparation of Financial Statements

    These unaudited interim consolidated financial statements of Apex Silver Mines Limited (the "Company") and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Such rules and regulations allow the omission of certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles, so long as such omissions do not render the financial statements misleading.

    In the opinion of management, these financial statements reflect all adjustments that are necessary for a fair statement of the results for the periods presented. All adjustments were of a normal recurring nature. These interim financial statements should be read in conjunction with the annual financial statements of the Company included in its 2000 Annual Report on Form 10-K.

2. New Accounting Standards

    Financial Accounting Standards No. 133, Accounting for Derivatives and Hedging Activities ("SFAS 133"), as amended by SFAS 137 and SFAS 138, became effective for the Company on January 1, 2001. SFAS 133 establishes accounting and reporting standards for derivative instruments and hedging activities. The Company engages in limited metals trading activities utilizing puts and calls and related instruments. Historically the Company has marked open positions to market, recording the difference in the carrying value to current earnings; accordingly, adoption of SFAS 133 at January 1, 2001, has no effect on the Company's financial position or results of operations. The Company recorded mark to market losses of approximately $89,000 and $163,000 for the quarter and six-month periods ended June 30, 2001, respectively, which are included in interest and other income in the Consolidated Statements of Operations. Inception to date, the metals trading activities have generated a mark to market gain of approximately $369,000.

    In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations ("SFAS 143"). SFAS 143, is effective for fiscal years beginning after June 15, 2002 (January 1, 2003 for the Company), and establishes an accounting standard requiring the recording of the fair value of liabilities associated with the retirement of long-lived assets in the period in which they are incurred. The Company is in the process of determining the future impact that the adoption of FAS 143 may have on its earnings or financial position.

3. Value Added Tax Recoverable

    The Company has recorded value added tax ("VAT") paid by its wholly owned subsidiaries, ASC Bolivia and Cordilleras Mexico, as recoverable assets. The VAT paid by ASC Bolivia is expected to be recovered through the sales of its production from the proven and probable reserves at the San Cristobal Project that the Company has begun to develop. Bolivian law states that VAT paid prior to production may be recovered as a credit against Bolivian taxes arising from production, including income tax. The VAT paid by Cordilleras Mexico is related to exploration activities and is recoverable upon application to the tax authorities. Cordilleras Mexico has received refunds for VAT taxes paid through 1998. Applications for refund of the remaining VAT continue to be filed and the remaining

6

refunds are expected to be received. At June 30, 2001, the recoverable VAT recorded by ASC Bolivia and Cordilleras Mexico is $4,829,771 and $378,870, respectively.

4. Property, Plant and Equipment

    The components of property, plant and equipment were as follows:

	June 30, 2001			December 31, 2000
Mineral properties	$	81,854,350		$	72,819,859
Buildings		1,408,242			1,166,868
Mining equipment		3,173,110			3,317,827
Other furniture and equipment		805,411			805,289
		87,241,113			78,109,843
Less: Accumulated depreciation		(1,004,162	)		(758,338	)
	$	86,236,951		$	77,351,505

5. Notes Payable

    During June 2001 the Company issued 70,875 shares of its common stock and recorded a $56,700 liability, to be paid in cash, as payment in full of a $900,000 note due to Barex. The note was entered into in December 1997, in connection with the purchase of the Toldos property in the San Cristobal area.

6. Commitments and Contingencies

    The Company had outstanding letters of credit in the aggregate amount of $410,000 at June 30, 2001. The letters of credit are associated with infrastructure development at the San Cristobal Project.

7

Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

    The following discussion and analysis summarizes the results of operations of Apex Silver Mines Limited for the three month and six month periods ended June 30, 2001 and changes in our financial condition from December 31, 2000. This discussion should be read in conjunction with the Management's Discussion and Analysis included in our Annual Report on Form 10-K for the period ended December 31, 2000.

    Apex Limited is a mining exploration and development company that holds a portfolio of silver and base metal exploration and development properties primarily in South America, Mexico and Central America. The composition and size of our exploration portfolio changes from time to time as we acquire new exploration properties with mineral potential and release exploration properties that have no further interest to us. None of the properties are in production and, consequently, we have no current operating income or cash flow. Our primary source of income since inception has been interest income. Our policy is to invest all excess cash in liquid, high credit quality, short-term financial instruments.

    Apex Limited is incorporated in the Cayman Islands and does not conduct any business that currently generates U.S. taxable income. There is currently no corporate taxation imposed by the Cayman Islands. If any form of taxation were to be enacted in the Cayman Islands, we have been granted exemption until January 16, 2015. Apex Silver Mines Corporation, our U.S. management services company, is subject to U.S. federal, state and local income taxes. Other than the management services company, our company does not pay income tax in the U.S.

Results of Operations—Three Months Ended June 30, 2001

    Interest and other income.  Interest and other income for the second quarter of 2001 is $0.5 million, as compared to $1.4 million for the second quarter of 2000. The decrease in interest and other income for the second quarter of 2001 is primarily the result of lower cash balances and lower interest rates during 2001, compared to cash balances and interest rates during the same period of 2000. In addition we recorded a $0.1 million mark to market loss related to our metals trading program during the second quarter of 2001 compared to a $0.1 gain for the same period in 2000.

    Exploration.  Exploration expense is $0.8 million for the second quarter of 2001, compared to $1.2 million for the second quarter of 2000. The decrease in exploration expense for 2001 is the result of reduced exploration activity as we continue to conserve our cash position and concentrate resources on the San Cristobal property.

    Administrative.  Administrative expenses are $2.2 million for the second quarter of 2001, compared to $2.0 million for the second quarter of 2000. The 2001 increase in administrative expenses is primarily the result of stock grants and options awarded to certain consultants and advisors, in lieu of cash, for their services. The options and grants were valued at $0.5 million and were recorded to administrative expenses during the period, compared to 2000 where monthly cash payments were recorded over a twelve-month period. The 2000 expenses were partially offset by a reduction in administrative spending as we continue to conserve our cash position.

8

Results of Operations—Six Months Ended June 30, 2001

    Interest and other income.  Interest and other income for the first six months of 2001 is $1.2 million, as compared to $3.2 million for the same period of 2000. The decrease in interest and other income for the first six months of 2001 is primarily the result of lower cash balances and lower interest rates during 2001, compared to cash balances and interest rates during the same period of 2000. In addition we recorded a $0.2 million mark to market loss related to our metals trading program during the first six months of 2001 compared to a $0.3 gain for the same period in 2000.

    Exploration.  Exploration expense is $1.9 million for the first six months of 2001, compared to $2.3 million for the same period of 2000. The decrease in exploration expense for 2001 is the result of reduced exploration activity as we continue to conserve our cash position and concentrate resources on the San Cristobal property.

    Administrative.  Administrative expenses are $3.6 million for the first six months of 2001, compared to $3.4 million for the second quarter of 2000. The 2001 increase in administrative expenses is primarily the result of stock grants and options awarded to certain consultants and advisors, in lieu of cash, for their services. The options and grants were valued at $0.5 million and were recorded to administrative expenses during the period, compared to 2000 where monthly cash payments were recorded over a twelve-month period. The 2000 expenses were partially offset by a reduction in administrative spending as we continue to conserve our cash position.

Liquidity and Capital Resources

    As of June 30, 2001, we had cash and cash equivalents of $47.7 million, compared to $61.1 million at December 31, 2000. The decrease is the result of $9.0 million invested in property, plant and equipment primarily related to the development of the San Cristobal Project, $4.4 million used in operations, including $1.9 million spent on exploration and a $0.3 million reduction of debt all partially offset by $0.3 million in proceeds from stock options exercised.

    Major pre-construction expenditures on the San Cristobal Project were substantially completed during the second quarter of 2001. From this point forward, pending opportunities in financial and metals markets, we expect to reduce our expenditures significantly while continuing to advance the project. Operations and project spending for the remainder of the year, including allocations, are expected to be approximately $4 million, net of interest and other income, and these annualized expenditures are expected to be reduced even further in the coming year. These expenditures will be funded from existing cash balances and interest income.

    We will require significant additional debt and equity financing from outside sources to complete development of the San Cristobal Project. There can be no assurance that we will be able to obtain the required financing on attractive terms, or at all.

9

Forward-Looking Statements

    Some information contained in or incorporated by reference into this report may contain forward-looking statements. These statements include comments regarding mine development and construction plans, costs, grade, production and recovery rates, permitting, financing needs, the availability of financing on acceptable terms, the timing of engineering studies and environmental permitting, and the markets for silver, zinc and lead. The use of any of the words "anticipate", "continue," "estimate," "expect," "may," "will," "project," "should," "believe" and similar expressions are intended to identify uncertainties. The Company believes the expectations reflected in those forward-looking statements are reasonable. However, the Company cannot assure that these expectations will prove to be correct. Actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth below and other factors set forth in, or incorporated by reference into, this report:

•

worldwide economic and political events affecting the supply of and demand for silver, zinc and lead;



•

volatility in market prices for silver, zinc and lead;



•

financial market conditions, and the availability of financing on terms acceptable to our company;



•

uncertainties associated with developing a new mine, including potential cost overruns and the unreliability of estimates in early stages of mine development;



•

variations in ore grade and other characteristics affecting mining, crushing, milling and smelting operations and mineral recoveries;



•

geological, technical, permitting, mining and processing problems;



•

the availability and timing of acceptable arrangements for power, transportation, water and smelting;



•

the availability, terms, conditions and timing of required government approvals;



•

uncertainties regarding future changes in tax legislation or implementation of existing tax legislation;



•

variations in smelting operations and capacity;



•

the availability of experienced employees; and



•

the factors discussed under "Risk Factors" in the Our Form 10-K for the period ended December 31, 2000.

    Many of those factors are beyond our ability to control or predict. You should not unduly rely on these forward-looking statements. These statements speak only as of the date of this report on Form 10-Q. Except as required by law, we are not obligated to publicly release any revisions to these forward-looking statements to reflect future events or developments.

10

Item 3. Quantitative and Qualitative Disclosures About Market Risk and Hedging Activities

    Currently our major principal cash balances are held in U.S. dollars. We maintain minimum cash balances in foreign currencies and therefore have a relative low exposure to currency fluctuations. Because we conduct our activities largely in several foreign countries, we may in the future engage in hedging activities to minimize the risk of exposure to currency and interest rate fluctuations.

    We expect that we will be required to hedge some portion of our planned production in advance in order to complete the financing necessary to develop San Cristobal. In addition, when we bring San Cristobal into production and begin to derive revenue from the production, sale and exchange of metals, we may utilize various price-hedging techniques to lock in forward delivery prices on a portion of our production. We would expect to balance the use of price-hedging techniques to mitigate some of the risks associated with fluctuations in the prices of the metals produced, while allowing us to take advantage of rising metal prices should they occur.

    Our company is engaged in limited metals trading activities utilizing puts and calls and related instruments in a manner similar to anticipated lender requirements. We recorded mark to market losses from these activities of approximately $89,000 and $163,000 for the quarter and six-month periods ended June 30, 2001, respectively. Inception to date, a mark to market gain of approximately $369,000 has been recorded. As we continue to mark our open positions to market, in accordance with SFAS 133, we expect to record minor fluctuations in mark to market gains and losses resulting from our trading activities. When activity increases to meet lender requirements, fluctuations in mark to market gains and losses from trading activities may increase substantially. Such fluctuations in mark to market gains and losses do not affect our cash flows. There can be no assurance that we will always benefit from the use of these techniques.

11

PART II: OTHER INFORMATION

Item 1. Legal Proceedings

    None.

Item 2. Changes in Securities and Use of Proceeds

    None.

Item 3. Defaults Upon Senior Securities

    None.

Item 4. Submission of Matters to a Vote of Security Holders

    The Annual Meeting of Shareholders was held on May 31, 2001. At the meeting the following directors were elected until 2004:

	Number of Common Shares Voted
Director
	Affirmative	Negative
Harry M. Conger	27,749,484	13,800
Charles B. Smith	27,749,484	13,800

    The directors continuing in office until 2002 or 2003 are Eduardo S. Elsztain, David Sean Hanna, Ove Hoegh, Keith R. Hulley, Thomas S. Kaplan, Kevin R. Morano and Paul Soros.

    The shareholders also ratified the Company's selection of PricewaterhouseCoopers LLP as the independent accountants for 2001 fiscal year with an affirmative vote of 27,745,264 Common Shares, with 11,610 Common Shares voting against and 6,410 Common Shares abstaining.

Item 5. Other Information

    None.

Item 6. Exhibits and Reports on Form 8-K

    None.

12

SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned thereunto duly authorized.

	APEX SILVER MINES LIMITED (Registrant)
Date: August 14, 2001	By:	/s/ THOMAS S. KAPLAN Thomas S. Kaplan Chairman, Board of Directors

13

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INDEX
PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

APEX SILVER MINES LIMITED An Exploration and Development Stage Company CONSOLIDATED BALANCE SHEET (Expressed in United States dollars) (Unaudited)
APEX SILVER MINES LIMITED An Exploration and Development Stage Company CONSOLIDATED STATEMENT OF OPERATIONS (Expressed in United States dollars) (Unaudited)
APEX SILVER MINES LIMITED An Exploration and Development Stage Company CONSOLIDATED STATEMENT OF CASH FLOWS (Expressed in United States dollars) (Unaudited)
APEX SILVER MINES LIMITED An Exploration and Development Stage Company NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States dollars)

Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 3. Quantitative and Qualitative Disclosures About Market Risk and Hedging Activities

PART II: OTHER INFORMATION

Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K

SIGNATURES